Explaining Southern California's economy

Paul Krugman gets Solyndra slightly wrong

Mercer 20725

Solyndra

A Solyndra solar rooftoop installation.

In a great column titled "Here Comes the Sun," the New York Times' Paul Krugman argues that we are on the brink of a solar transformation of our energy economy. Maybe he's right. During the course of proving his point, however, he has this to say about the controversial solar startup Solyndra, which recently went bankrupt and whose funding has brought the Obama Administration under fire:

These days, mention solar power and you’ll probably hear cries of “Solyndra!” Republicans have tried to make the failed solar panel company both a symbol of government waste — although claims of a major scandal are nonsense — and a stick with which to beat renewable energy.

But Solyndra’s failure was actually caused by technological success: the price of solar panels is dropping fast, and Solyndra couldn’t keep up with the competition. In fact, progress in solar panels has been so dramatic and sustained that, as a blog post at Scientific American put it, “there’s now frequent talk of a ‘Moore’s law’ in solar energy,” with prices adjusted for inflation falling around 7 percent a year.

I actually disagree with the specifics of Krugman's Solyndra analysis. The company wasn't done in by price competition from cheap Chinese solar panels, which weren't all that technologically superior to solar panels from the past (old-school solar hasn't changed much in decades). The Department of Energy had funded Solyndra as part of what I think was a strategy to avoid this competition entirely and set up a separate market in thin-film solar panels. In this respect, the DOE was acting as a "super venture capitalist," trying to support an entire industrythin-film solar

The idea was that Solyndra was a good example of what the U.S. is good at China isn't (yet): innovation. The DOE knew that China's massive, multi-billion-dollar investment in conventional solar was going to create the scale the Chinese needed to dominate the flat-panel market. But Solyndra's technology promised to get the cost of solar power down to an important $1/watt threshold, at which point solar becomes a legitimate rival to cheap coal-fired power.

Thin-film solar could actually get the price of power down to $0.50/watt. At utility scale, this would yield electricity that's very cheap and also, it goes without saying, very green.

Krugman is right to make this argument now, in the context of a traditional-energy revival through the advent of "fracking" — a technology that can be used to get at oil and natural gas deposits that were formerly inaccessible. The fracking boom is convincing some folks, mainly on the political right, that we can achieve near-energy-independence simply by using the technology to max out our domestic resources.

But what if solar winds up being even cheaper? That would certainly bring on the transformation that Krugman anticipates.

Want to read more about Solyndra? Check out:

All Solyndra, all the time: A DeBord Report roundup


Follow Matthew DeBord and the DeBord Report on Twitter.

blog comments powered by Disqus